Bitcoin on steroids:
It’s hard to finish the year without talking about the frenzy for bitcoin. The price of bitcoin has gone insane. Whilst the bankers stand on rooftops in their bow-ties shouting “It’s a fraud, it’s a scam!”, the crowds just don’t care. They want it. It’s like a vortex sucking in non-believers one-after-the-other. Every day is like shoppers gone bonkers on Christmas Eve. There seems to be no stopping the lust for bitcoin at any price.
It’s fifteen times the price at the start of the year. Three weeks ago the price was $6’000. A week ago it was $9000. At one point, yesterday night, the price was well over $19’000. It has since fallen back to around $15’000, 25% below the peak of 24 hours ago. By the time you read this, the price could be anything. Talk about a volatile asset!
Future history books will dedicate a chapter to this amazing phenomenon. We just don’t know the title yet. The story isn’t finished. Will the title include words like “bubble” or “mania”? Or will we see titles like the “Early Development of the Crypto Economy” or “Evolution of Digital Currency”?
The current frenzy is due to the imminent trading of bitcoin futures on US regulated exchanges. Bitcoin, previously an unregulated asset, is about to enter the regulated world.
The Chicago Mercantile Exchange, (CME), announced that it will commence trading bitcoin futures on December 18th, with a contract size of 5 bitcoins. Not to be outdone, the Chicago Board Options Exchange (CBOE) immediately announced it will start trading bitcoin futures 8 days earlier – starting tomorrow, this Sunday 10th December. The CBOE futures will be for one bitcoin (instead of 5, like the CME), and they have announced that trading will be “commission free” until the end of the year. With bitcoin being the hottest “asset” on the planet now, it’s easy to understand why these two exchanges are in a race to grab the largest slice of the bitcoin pie.
From tomorrow, this Sunday, bitcoin will move into an area where every American with a bank or broker account can play. It’s no longer the wild-west. It changes the previous perception that it’s only for geeks in anoraks and silk road hippies. Americans will no longer have to deal with dubious foreign exchanges or cope with complicated trading software. Bitcoin will be just a phone call away.
Is bitcoin like tulip-mania?
The rise in bitcoin’s price has surpassed all previous asset bubbles, including the “dot-com” bubble of the 1990’s. It’s often compared to the tulip mania of the 1600’s. It is said that the price of a tulip bulb then reached that of a fashionable central Amsterdam mansion. That would be about 3 million euros today. We don’t know the end of the bitcoin story yet – or even if there is an end.
The obvious problem with Tulip bulbs in Amsterdam, was that there was an almost unlimited supply of tulips potentially available from the New World. As soon as the prices started to rise, word got out. Enterprising sailors sent out ships to bring them home. The laws of supply and demand worked as they should.
Bitcoins, on the other hand, have a limited supply. There will never be more than 21 million of them. Of these, nearly 17 million have already been mined. It will take more than 100 years to mine the remaining 4 million.
There are 35 million millionaires on planet earth. There aren’t enough bitcoins if they all want one.
Is bitcoin worth anything?
Around 1.7 million people currently own bitcoin. That’s around one adult in 2800. It’s not many. If you are on a small Island, with a bitcoin, you could be the only believer. It would be worthless. A bitcoin is only worth something if everyone else believes it’s worth something. We’re not there yet. It’s still in the “for geeks only” phase.
Those who are investing today believe it’s like having an email address in 1990. Pretty useless back then, but it had potential. They hoped that somewhere down the road, everyone else was going to get an email address (“The early majority”).
It’s like investing in an oil prospecting company. They may strike oil – or they may not. It’s still speculative. If the “early majority” arrive it’ll be worth a lot. At this point, it’s not for your children’s college fund, but if you want in, see the next paragraph.
Swiss railway ticket machines sell bitcoin
The 10’000 CFF railway ticket machines all sell bitcoin. You need a Swiss mobile phone number and a bitcoin wallet downloaded from the App store.
Bitcoin related words
FUD = Fear Uncertainty and doubt
HODL = Hold on for dear life
FOMO = Fear of missing out
dapp = decentralized application. – i.e. an app made by groups of programmers, not owned or controlled by any person, government or company, which does not show you ads, nor mine your data. Currently there are many under development.
“Limit-Up” = They halt bitcoin futures trading because the price moved too fast. (It’s a new word from this coming Sunday). You may also hear “Limit-Down”.
Image is of a rare Casascius physical bitcoin, the first physical representation of a bitcoin. Production was shut down by the US Financial Crimes division. This coin is part of early bitcoin history. It’s fully loaded with one bitcoin, plus all the forks (1 bitcoin cash and 1 bitcoin gold).
The private key is under a hologram sticker which self destructs as soon as it is peeled or tampered with. The window shows part of the key which allows any investor to go on the blockchain and check that the coin is fully loaded.
Its value is unknown, since one has never been sold in auction. Most likely it would be valued at substantially more than the bitcoin it contains.